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Alternatives to Stock Market

Alternatives to Stock Market

The stock market may be the cornerstone of the American investment experience, but that doesn’t mean it is the only or even the best option for you. Stocks are seen as one of the only alternatives to create passive income, which is far from reality. There are many investment alternatives to stocks that can make your money grow while fitting your financial needs better. On top of that, it is always wise to diversify your investments. So even if you keep investing in the stock market, it is a wise decision to consider distributing your money in other investments.

There are many reasons for you to be looking for other options of investment outside the stock market. Maybe the ups and downs of the stock market are too much for you. Or perhaps you want to diversify your portfolio. Or you are only looking for a more tangible investment that you can have more control over. Regardless of your motives, if you are searching for an alternative to the stock market, this article may help you. Below are some great alternatives to the stock market, how they work, their advantages, and their risks.

Real Estate

  • Barrier to Entry: Medium
  • Risk Level: Medium
  • Potential Returns: Medium

Another one of Americans’ favorite financial ventures is real estate. This option has been a solid investment for decades. Even though there were some occasional busts, as seen in 2008, real estate is still considered one of the best tangible assets you can own. However, it is important to keep in mind real estate isn’t necessarily a very liquid asset class, which means you won’t be able to sell your investment easily. Real estate returns are usually generated via rental yield and property capital growth.

There are many different strategies you can adopt with Real Estate investing. One such strategy is to focus on rental property investing. You can work with long-term rentals, with tenants staying for at least a semester, or you can rent your property short-term at platforms such as Airbnb. The downside of rental property is that it is not a truly passive income. You will need to vet tenants, keep a budget for repairs and maintenance, and be available for whoever rents the place. If you don’t mind making a little fewer returns, there are property managers that can do this part of the job for you.

Flipping Properties is another approach that has become quite popular. Flipping a property consists of improving the condition of the real estate you bought, so you can sell it for a higher price. This is a better option if you don’t have the patience to be a landlord. Flipping homes can be very profitable, but it all comes down to the scenario of the local real estate market. If the demand is higher than the offer, there will be a lot of opportunities to generate returns. If it is the contrary, then you will have a hard time trying to turn a profit.

As can be seen, real estate is a good alternative to stocks. It is not as passive as bonds, but it can be a great source of income if done right. In terms of risk, it depends on which stocks or which properties you are buying, as well as your local area, but real estate tends to offer a little less risk than the stock market.


  • Barrier to Entry: Low
  • Risk Level: Low
  • Potential Returns: Low

Bonds can be a great alternative to the stock market. A bond is a loan taken by the government or a company. Instead of going to a bank, the business or the government gets the money from investors who bought their bonds. The investors in exchange receive an interest rate for lending money to the company or government. Different from stocks, bonds are considered a low-risk type of investment, especially if they are government bonds. That is because the US treasury backs them up. When it comes to corporate bonds, the risk can be higher, but it is still almost always lower than stocks. That is because bonds carry a promise of their issuer to return the face value at maturity, a promise non-existent in the stock market.

But as usual, if the risk is lower, the return is often lower too. The interest rates of bonds don’t climb as high as the return of stocks. Historically, US treasury bonds returned 3% to 5% on investments, which is a pretty good interest rate. Unfortunately, these bonds have suffered from a decline in yields along with the long decline in government bond yields. Corporate bonds tend to offer higher interest rates sided to a higher level of risk. Still, these rates are nothing close to the returns stocks can bring.

Private Equity

  • Barrier to Entry: High
  • Risk Level: High
  • Potential Returns: Very High

Private equity is investing in unlisted companies. This is a high-risk venture that has the potential to offer high returns. You can also invest in private equity through funds. In exchange for your investment, you will get either a share of the company or a share of the fund. It sounds similar to stocks, but private equity is a way less liquid investment. Unless the company thrives and starts paying dividends or is sold, you won’t have access to the money invested. When entering private equity, you should be prepared to wait for at least 5-10 years to see some significant return, although there are exceptions. Usually, you will need to have a large capital to invest if you wish to get into private equity. The minimum investment can vary from $250,000 to $25 million.

There is a niche in private equity called venture capital. This niche consists of investing in start-ups with growth potential that need financing for their early stages. Needless to say, it tends to be even riskier, but if the business becomes successful, the return can be extremely good. If you do decide to invest in venture capital, keep in mind you are betting on a young business's potential, so there is a big chance you won’t get any return at all. Still, private equity can be a great addition to your diversified portfolio. Diversification is the best way to guarantee good and safe returns.


  • Barrier to Entry: Low
  • Risk Level: High
  • Potential Returns: Medium-High

Like stocks, with time and in the right circumstances, art can become more valuable. If an up-and-coming artist goes on to a successful career, the price of their work can go up a lot. On top of that, pieces from relevant artists tend to increase in value over time, even though that doesn’t always happen. It is important to highlight that art is a long-term investment. If you can’t afford to wait 10 years for some return, art is probably not the best investment for you.

Secondly, art is an illiquid asset, meaning it can't be converted to cash right away, like stocks. Instead, you will need to sell the art, which can take some time. Like the stock market, the art market has its ups and downs. Investing in art is as risky as investing in stocks, if not more. A great side of the art market is that it doesn’t fluctuate with the stock market. Thus, if stocks are going down, the value of your art won’t necessarily be dropping too. Thus, art is an interesting option to diversify your portfolio.

The return of art varies a lot from piece to piece, but it can get quite high. It is important to study the market beforehand, so you're sure you are making the right purchase. In recent years, many platforms that buy pieces of art and then sell shares of them to investors started to surge. This is a good way to enter the art world if you want to invest a smaller amount of money or don’t want to do the searching for the ideal piece.


  • Barrier to Entry: Low
  • Risk Level: Very High
  • Potential Returns: Very High

This is the most experimental alternative. Cryptocurrencies, such as Bitcoin and Ethereum, are virtual currencies secured by cryptography. Most cryptocurrencies work using a technology called a blockchain. The blockchain is a digital ledger keeping track of all transactions in a decentralized manner. In practice, cryptos are a form of payment that can be exchanged online for goods, services, or other investments.

The crypto market is extremely volatile and speculative. Since it is also a very young market, government regulations haven’t quite caught up with its technology. For these reasons, there is a great risk involved in cryptocurrencies’ investments. But as most of the high-risk cases discussed, it can offer very attractive returns. Many people have made a lot of money investing in cryptos.

The digital asset market is not only made of extremely volatile and speculative cryptocurrencies. With the recent innovations in decentralized finance, one can take advantage of blockchain to generate yield even on stable assets. There are now dozens of stablecoins, cryptocurrencies pegged to the dollar, or other fiat currencies, which can be used in yield generating opportunities such as lending. For example, crypto-savings accounts can pay interest rates as high as 12%.

There are almost no barriers to entry in this market, only learning how to use the platforms. Because it is a young market, the future of cryptocurrencies is still very unclear. If you are interested in new investments, this can be a great alternative to stocks and a solid addition to a diversified portfolio.

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